Will This Crisis Dominate Your Portfolio in 2019?

From Bloomberg…

European Central Bank President Mario Draghi was at the top of his game at Thursday’s governing council meeting. His performance on a communications tightrope was just enough for markets to cling to. Europe will miss him when he leaves next year.

Is this a joke?

Europe will miss Mario Draghi and his terrible decisions? Really?

I’ll bet most countries in the European Union (EU) can’t wait for him to leave.

Remember, this is the guy that just puts blinders on and prints money.

This is the guy that pushed interest rates into negative territory.

Bloomberg continues:

For much of the past decade they’ve [the EU] been able to duck difficult decisions, secure in the knowledge that the European Central Bank would step in and fix things.

When Bloomberg writes ‘fix things’, what they actually mean is ‘print more money’.

Draghi’s got a tough job, no doubt about it.

Most central bankers only have to think for one. Draghi is thinking for 20.

From his first day on the job, Draghi was watching Europe in crisis mode.

Yet his solution was just to print more money.

Europe is now swamped with money. Returns on bonds are disgusting. Since taking the helm, Draghi has left the EU no better off.

The place is still in crisis mode. And Bloomberg thinks we should miss this man.

For what exactly?

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It’s not just financial burdens that trouble the EU

It’s not just financial burdens that trouble the EU.

They’ve now got a population looking at their socialist agenda in disgust.

It just took them a little time to realise.

First it was the UK to go.

Brexit is not just some long drawn out process involving a lot of paper work. It’s a message, from the people of the UK to their politicians:

‘We don’t want to be under the thumb of the EU. We’ve finally had enough.

Look at the French and you’ll see a similar discontent for their pollies.

A socialist climate change tax is the straw that broke the camel’s back.

Now France is full of angry yellow-vest-wearing protesters.

The French already deal with incredibly high taxes. Add to this falling wages and a rising cost of living…

Immigration from all sorts of neighbouring EU nations and the rest of the world is diluting their culture.

The French have finally had enough. I’m just surprised it took this long for them to snap.

But what’s started in France seems to have been pushed into Belgium and the Netherlands.

It wasn’t a fuel tax that set the Belgians off. They just finally woke up, like the people in UK and France.

France 24 writes:

The “gilets jaunes” or “Yellow Vests” movement began in France as a response to a proposed hike on fuel prices.

Now it’s turned into a large, amorphous protest movement railing more generally against high taxes and the cost of living. And that, at least, is a notion that can’t be confined to just France.

On Saturday, December 8, Belgian police fired tear gas and water cannons at “gilets jaunes” protesters in the capital, Brussels, as they tried to breach a riot barricade.

Meanwhile in Paris, as protesters took to the streets for a fourth successive Saturday of discontent and violence, one slogan rang out above them all: “Macron, resign!” So with a protest that seems so fundamentally tied up with the perceived failings of French President Emmanuel Macron’s government, how did the Yellow Vests movement transcend borders, sparking demonstrations in neighbouring Belgium?

The demonstrations in both countries come from the same sense of struggling to make ends meet every month.

It began, in both countries, with the government increasing the cost of fuel. Belgians, for instance, pay the highest state taxes on diesel in Europe.

The French government backed down on the proposed fuel tax increase, and Belgian ministers did the same, announcing the fuel prices would not be index-linked from 2019. But in both countries, the protests have continued.

And I expect they will continue, as long as EU governments continue to control, rather than serve their people.

How does this affect your portfolio?

In 2017, it was Trump.

This year it was the US and China.

In 2019, I expect it will be the EU pushing stocks every which way.

Talk of interest rate movements will play a role. High debt levels always get some attention.

But I think the continuing crisis in Europe will dominate. It will make headlines, and move stocks in the coming year.

This shouldn’t change how you invest in the upcoming year, though.

A lot of this is actually just noise.

What’s really important to your returns in 2019 are the businesses you buy.

What’s this stock worth? Is the business growing? Do they have a competitive advantage? What’s the price you’re paying?

These questions are far more important than any wider macro event that happens next year.

And with prices heading lower as we jump into a new year, you’ll have that many more opportunities to look at.

Happy hunting,

Harje Ronngard,
Editor, Money Morning

PS: In this just released report, Matt Hibbard shows you his top five dividend picks for 2019. Click here to claim your copy today.


Harje Ronngard is the lead Editor at Money Morning. With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation. There are two questions Harje likes to ask of any investment. What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Money Morning readers 5 days a week.. Harje also contributes his insights in Total Income, headed by income specialist Matt Hibbard. Harje loves cash-rich businesses, so he feels right at home among Matt’s incredibly exciting income plays.


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